Perseus tickles investors’ ivories

Perseus Mining (PRU)

With
Perseus Mining
rising more than 800 per cent over the past 18 months, some investors might be thinking the gold explorer has already had its run. However, some analysts are still tipping the stock to rise in the near term after it upgraded the resource at its Sissingue project this week.

Some investors moved in early as shares in the West African miner posted a record high of $2.44 each last week, ahead of the announcement it had upgraded the mineral resource at the Sissingue deposit at its Tengrela gold project in Ivory Coast. Grades at the site improved by 30 per cent, while contained ounces increased by 13 per cent. Royal Bank of Scotland upgraded the stock from a “hold" recommendation to a “buy", citing an enhanced net present value of the company’s second project.

The main game for Perseus is the Ghanaian-based Central Ashanti gold project (CAGP). The resource update may have dropped total tonnes by 12 per cent, but the increased grades have given greater confidence about the production profile. “The availability of higher grades early on in the mining profile has a significant positive impact on the project NPV due to bringing forward cash flows," RBS said.

Perseus could now have output peaking at 320,000 ounces by 2014, up from 250,000 ounces previously estimated.

RBS has lifted its share price target from $2.10 to $2.53, reflecting the impact of a 20 per cent increase in net present value of the company.

Some investors who bought into the stock when it was fetching as low as 23¢ in November 2008 have been rewarded handsomely as it has risen almost 10-fold.

RBS says that the development proposal of Sissingue is similar to Lihir Gold’s 2 million tonnes per annum Bonikro plant, which could help bolster the prospects for the project. However, the broker has highlighted that a key risk for Perseus is infrastructure and transport with Sissingue located 900 kilometres from the nearest port.

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St Barbara (SBM)

Shares in gold producer
St Barbara
advanced by over 4 per cent on Tuesday as investor hopes that the company could post a profit for the 2010 financial year were boosted by an encouraging quarterly report. The high-cost producer’s operating cash costs came in at the lower end of its guidance at $790 per ounce for fiscal 2010, while sales price for its 237,294 ounces shipped for the year recorded an average of $1244 an ounce. While this only considers operating cash costs and sales, it might pave the way for the company to post a profit. St Barbara recorded a $76 million net loss after tax last year and a $17 million loss in fiscal 2008.